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Monday, August 25, 2014

Exploring Market Opportunities for Wearable Bands

As more consumer electronics manufacturers contemplate a future in wearables, it's time to ask the decisive market development questions. Such as, where are the most appealing high-margin opportunities -- are they in making devices or within the software applications?

The wearable band market grew 684 percent on a worldwide basis in the first half of 2014 compared with the first half of 2013, according to the latest global market study by Canalys.

Canalys currently tracks wearable device shipments and segments the market into Smart bands -- which are capable of running third-party applications (apps), and Basic bands, which are not an opportunity for an ecosystem of developers.

Fitbit and Jawbone have very successfully grown and strengthened their relationships with channel partners internationally to grow global shipment volumes. They took first and second place respectively in the basic wearable band market in the first half 2014.

"Nike's market share has fallen as it cuts resources in this area, while new entrant Garmin had a successful launch of its Vivofit device and is chasing third place. The challenge all vendors face is keeping consumers engaged with the devices, 24 hours a day, seven days a week," said Chris Jones, VP and principal analyst at Canalys.

Samsung again became the worldwide leader in the smart wearable band market in the first half of 2014 with the release of three new products in the second quarter -- the Gear 2, Gear 2 Neo and Gear Fit. In July, Samsung released its fifth smart band in less than a year, the Gear Live, based on Android Wear.

But Samsung must improve device sell-through otherwise it will again have to resort to heavy discounting through promotions to move inventory. The Pebble Steel helped Pebble keep its momentum and its app store continues to grow while Sony completes the top three.

Android Wear shipments will appear in Canalys' Q3 shipment tracking, with LG’s G Watch and Samsung’s Gear Live officially launching the platform. Motorola's Moto 360 and others are also coming soon. These devices have used off-the-shelf smartphone components to get to market sooner.

Mobile operating systems and software apps must be extensively pared back for smart wearable bands. Android Wear represents an initial first step by Google. It will undoubtedly continue to refine and improve the Wear platform as it has done with Android.

Many have speculated that Apple will soon launch a smart wearable band. Canalys expects that such a product would make extensive use of custom components. Its hardware design will require innovation related to wireless charging, waterproofing, and display and battery technologies.

According to the Canalys assessment, smart wearable bands need tremendous advances across the entire component ecosystem to achieve multiple days of battery life. Smart wearable bands should not necessarily resemble watches, but should instead adhere to their own unique design constraints.

New products will be launched at IFA, but most technology companies are waiting to see what Apple will do first. The market will see dramatic change in the coming months and vendors with early-mover advantages will come under pressure.